Fully developed cost of an ERC MHR community should approximate 60% to 70% of the cost of a conventionally built single family home community
Direct material and labor costs lower as they are factory-built
Land allotment is approximately 1/3 less than what is needed in conventionally built homes
ERC estimates MHR home prices at approximately $160,000 per home, with similar square footage for a conventionally built home in close proximity at $250,000 or more
Cost control highly enhanced given developer’s elimination of numerous trades including floor-slabs, wall construction, drywall, paint, internal plumbing, internal electrical, internal HVAC, paint, flooring, roofing and more
Allows for tighter pre-purchasing and higher level of fixed of costs
Speed To Revenue
Horizontal” nature of land development and construction (underground, paving, and landscaping only), makes sites available sooner
Homes can be moved into the community faster, and in groups
Homes are made available for rent sooner
ERC anticipates that most homes will have lease contracts in-place prior to being transported to the community
Once homes are set up, rent collection can immediately commence
ERC projects 100% occupancy of its developments that are 100 units or smaller within 12 months
Zoning & Entitlements
ERC’s MHR communities will be developed outside of core urban areas where higher and better uses of land are more likely, resulting in lower land costs and faster entitlement processes
According to surveys, monthly rent savings of $1,000 is worth as much as 15 to 20 minutes of additional commute to renters
ERC will seek entitlement of land that is “a bit further out” and not in competition for higher zoning uses
The ERC development team will ensure that proper zoning and entitlements can be achieved before acquiring land for new development
Affordability
The KEY to the ERC MHR platform strategy is to address the strongest and broadest market demand
Focus on extensive need for separate family living in 3-bedroom / 2-bathroom homes approximating 1,400 square feet
Homes that are affordable for entry-level families
Of particular concern in the in-migration states of the Southeast, where single-family home prices and rental levels are increasing materially
Approximate $1,000 / month savings afforded in ERC’s MHR communities allow for a broader, deeper market of potential renters
Product Overview
Cost: Average cost per home estimated at ~$65,000; all-in development cost of ~$160,000
Home Build: Prioritization on structural integrity over amenities
Features such as hard-surfaced floors (no carpets), wider exterior walls (2” X 6” vs 2” X 4”), senior grade insulation, full FEMA-code storm protection, etc.
Optional features such as track lighting, recessed lighting and crown- molding are considered but will be de-prioritized in favor of the above items listed based upon the need for cost control
Financial Viability: Despite acute demand for building materials given the ongoing development surge in the in-migration states, ERC believes it can achieve attractive returns
Demand driving up the cost of manufactured homes…
…However each $5,000 of increased home cost = only ~$31 of required rent to maintain yield – current rent comparables support these rent levels
Tax Advantage: Shorter depreciation life of manufactured homes
Quality & Maintenance: Overall structural strength of modern-day manufactured homes on par with conventionally built homes
Maintenance standards will be rigorous in ERC’s MHR communities, with full internal inspections of each home monthly
Homes closely monitored on an ongoing basis
Many manufactured homes are 30 and 40+ years old, proving their sustainability. All ERC MHR homes will be brand new, with an advantageous combination of allowable depreciable life and practical longevity
Illustrative Homes
Scaling the ERC Strategy
ERC will continue to expand its deal- sourcing channels to access new development opportunities, leveraging its relationships across local market constituents including national and local brokerage firms
ERC will combine its research-focused approach with both targeted and opportunistic sourcing to develop within markets that fit the criteria for the MHR product
ERC anticipates that additional team members will be added to development, asset management, property management and finance as the pipeline and community portfolio grows
In-house asset and property management will be leveraged initially, bolstered by local property management, with ERC selecting best-in-class local managers
Develop Zephyrhills and additional near-term pipeline
Quickly scale pipeline with additional capital infusion
As ERC completes near-term developments and continues to build the pipeline, additional senior and junior staff to be brought in-house
ERC’s local market presence medium to long-term will depend on where it can quickly build scale
ERC will pursue markets that meet its target criteria, provide compelling economic and scaling opportunities based on robust, data-driven research and offer attractive opportunities to acquire land that fits the MHR strategy
Portfolio Scaling and Exit Strategies
ERC seeks to develop numerous MHR communities, targeting a run-rate of 3,000 homes per year in the next 3+ years
Developed MHR communities are expected to produce attractive cash flow on an ongoing basis as well as benefit from value appreciation
ERC anticipates up to 5 – 7 year average hold periods for the developed portfolio
ERC will remain flexible and opportunistic in terms of monetization strategies to maximize overall returns and multiple on invested capital
ERC anticipates that multiple exit opportunities will exist for the portfolio as SFR becomes an increasingly popular and sought-after asset sector
Sector has already become the focus of institutional capital and public REITs who have made significant investments into the asset class
Substantial capital continues to be allocated to SFR and will need to be deployed in scale over the next several years; buyers will seek portfolio acquisitions to quickly gain scale
